Waste Management 2006 Annual Report Download - page 73

During the third and fourth quarters of 2006, we recorded impairment charges of $10 million and $14 million,
respectively, for assets and businesses associated with our continuing operations. The charges recognized during the
third quarter of 2006 were related to operations in our Recycling and Southern Groups. The charges recognized
during the fourth quarter of 2006 were primarily attributable to the impairment of a landfill in our Eastern Group as
a result of a change in our expectations for future expansions.
(Income) expense from divestitures — We recognized $44 million of net gains on divestitures during the year
ended December 31, 2006, which were direct results of the execution of our plan to review under-performing or
non-strategic operations and to either improve their performance or dispose of the operations. The majority of these
net gains was recognized during the second quarter of 2006 and relates to operations located in our Western Group.
Total proceeds from divestitures completed during the year ended December 31, 2006 were $184 million, all of
which were received in cash.
Other — During the fourth quarter of 2006, we recognized a charge of approximately $26 million for the
impact of an arbitration ruling against us related to the termination of a joint venture relationship in 2000. The party
that purchased our interest in the joint venture had sued us, seeking a variety of remedies ranging from monetary
damages to unwinding the sale of assets. In the fourth quarter of 2006, the arbitration tribunal ruled in the other
party’s favor, awarding them approximately $29 million, which includes monetary damages, interest, and certain
fees and expenses. Prior to the ruling, the Company had recorded a reserve of $3 million. For additional information
regarding this matter refer to Note 10 of our Consolidated Financial Statements.
Year Ended December 31, 2005
Asset impairments — During the second quarter of 2005, our Eastern Group recorded a $35 million charge for
the impairment of the Pottstown Landfill located in West Pottsgrove Township, Pennsylvania. We determined that
an impairment was necessary after the Pennsylvania Environmental Hearing Board upheld a denial by the
Pennsylvania Department of Environmental Protection of a permit application for a vertical expansion at the
landfill. After the denial was upheld, the Company reviewed the options available at the Pottstown Landfill and the
likelihood of the possible outcomes of those options. After such evaluation and considering the length of time
required for the appeal process and the permit application review, we decided not to pursue an appeal of the permit
denial. This decision was primarily due to the expected impact of the permitting delays, which would hinder our
ability to fully utilize the expansion airspace before the landfill’s required closure in 2010. We continued to operate
the Pottstown Landfill using existing permitted airspace through the landfill’s permit expiration date of October
2005.
Through June 30, 2005, our “Property and equipment” had included approximately $80 million of accumu-
lated costs associated with a revenue management system. Approximately $59 million of these costs were
specifically associated with the purchase of the software along with efforts required to develop and configure
that software for our use, while the remaining costs were associated with the general efforts of integrating a revenue
management system with our existing applications and hardware. The development efforts associated with our
revenue management system were suspended in 2003. Since that time, there have been changes in the viable
software alternatives available to address our current needs. During the third quarter of 2005, we concluded our
assessment of potential revenue management system options. As a result, we entered into agreements with a new
software vendor for the license, implementation and maintenance of certain of its applications software, including
waste and recycling functionality. We believe that these newly licensed applications, when fully implemented, will
provide substantially better capabilities and functionality than the software we were developing. Our plan to
implement this newly licensed software resulted in a $59 million charge in the third quarter of 2005 for the software
that had been under development and capitalized costs associated with the development efforts specific to that
software.
During the fourth quarter of 2005, we recognized an $18 million charge for asset impairments. This charge was
primarily attributable to the impairment of a landfill in our Eastern Group, as a result of a change in our expectations
for future expansions, and the impairment of capitalized software costs related to two applications we decided not to
develop further.
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